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Key considerations for introduction of digital banks in Korea

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On June 18, Korea’s financial regulator, Financial Services Commission (FSC) unveiled measures to introduce online-only digital banks, and on July 22, it introduced screening criteria for digital bank applicants. The criteria include innovative business plans, shareholder composition, stability of business model, customer benefits, contributions to growth and advancement of the financial industry, and potential for overseas forays, in addition to disqualification criteria provided in the Banking Act. Meanwhile, a bill has been submitted to the National Assembly to revise the Banking Act in a way that eases bank ownership rules. More specifically, the bill proposes to set the minimum equity capital of digital banks at 25 billion won, and allow non-financial companies to hold up to a 50% stake in a digital bank. If digital banks launch successfully in Korea, they are expected to accelerate banking reform, enhance banks’ IT capacity, and strengthen consumer benefits with more diversified services and products. In Korea, new bank has not been established in the past 23 years, indicating high entry barriers in the market. Lacking motivation for innovation amid government protection and intervention, domestic banks have neglected to strengthen IT capacities. They mostly saw IT investment as cost burden, have been reluctant to expand online businesses due to concerns over cannibalization, that is, eroding business of existing branch network, and kept antiquated IT systems


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Title Key considerations for introduction of digital banks in Korea
Similar Titles
Material Type Articles
Author(English)

Suh, Byungho

Publisher

[Seoul]:Korea Institute of Finance

Date 2015-11
Series Title; No Current Issues
Journal Title; Vol./Issue Korean Economic and Financial Review:
Pages 3
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Economy < Economic Administration
Industry and Technology < IT
Holding Korea Institute of Finance